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Which car loan to go for?

Discussion in 'Insurance & Loan Reviews' started by dj.nish, Sep 12, 2011.

  1. dj.nish

    dj.nish Superiore

    For the TJet+, I've got the following quotes:
    Loan amount - Rs 745,000
    Down payment - Rs 200,000
    Tenure - 60 months
    Scheme - Advance EMI

    1. Kotak - Rs 16,400 pm (at 11.5% ROI)

    2. HDFC - Rs 16,600 (he said 12.5% ROI, but might revise it downwards as I'm a salary account holder and a Preferred customer)

    3. SBI - Rs 16,180 pm (However, this is at 11.25% FLOATING rate).

    Is it advisable to go for SBI? I have heard some negative reviews about processing time. Also, in the current scenario, should one go for floating rates?

    I have heard varying degrees of reviews for SBI. But since my documents are in order, I do not think there should be any hindrance from my end.
  2. Ravi

    Ravi Staff Member Janitor

    Grande Punto 1.3
    I have my loan from SBI, and yes it was bit time taking to take loan from them. But once done, it is smooth.
    So depending on your city, find out service of SBI. If its manageable, take it from it. Otherwise, take who is giving at lowest rate.
  3. dj.nish

    dj.nish Superiore

    I have an account with SBI (New Delhi) which is jointly held along with my father. So will that make me a better / faster prospect for loan in Mumbai? My car will be delivered after 3 weeks, so I have time on my hand.
  4. anoop

    anoop Superiore

    All my dealings with SBI\SBT have been very good, and was super quick.

    I got one car loan approved from SBT in 3 hours flat (time from submitting my documents to get the cheque) and another one from SBI was equally hassle free - they came to collect all the documents in advance and I had to visit the bank only once. We took less than 2 hours and all formalities were done and loan amount was wired to the dealers account.

    If you can, get the loan from SBI only. AFAIK, SBI interest rates are on daily diminishing, there is no part payment penalty, no pre closure penalty. You can pay any amount along with your EMI - be it small or large - which will help you to cut down the interest faster.

    I am not well qualified to comment about whether to opt for floating rate or for fixed, but if every thing works out same or if you plan for floating rate, do get the loan from SBI.

    EDIT: A lot of this processing depends on the manager - do try to drop in and have a chat with him\her and see how friendly they are and how accommodating are they with the loan request. AFAIK, you need to open a new account in Mumbai branch, but you can leverage the existing relation with SBI.
    Last edited: Sep 12, 2011
  5. dj.nish

    dj.nish Superiore

    Guys, I'm really confused right now.

    The debate is 'EMI in advance vs arrear'. Prima facie, EMI in arrear option looks better. Here's my logic:

    Loan required - Rs 700,000
    EMI - Rs 15,250 odd pm if ADVANCE scheme is availed
    EMI - Rs 15,350 odd pm if ARREAR scheme is availed

    1. If I take Advance EMI option - I will have to pay 1 EMI upfront and I'll be given funding of Rs 700,000-15250-Processing charges. So that means I have to put additional amount towards down payment. Now I'm already stretching myself to pay the DP of Rs 2.4 lacs. So that means I have to put in additional 15k odd?

    And still the interest is being computed on the entire Rs 700,000? Seems odd to me.

    Also where does that 1st payment of Rs 15,250 go towards?

    2. Arrear EMI option - if I get loan disbursement after Sep 15th, then my first EMI gets debited on Oct 15th. Also, I get the entire loan amount as a cheque, so no additional down payment from my side. The only downside is that my EMI increases by roughly Rs 100 pm or Rs ~6,000 for a 5 year tenure. I'm OK with this.

    What do you guys suggest?
  6. anoop

    anoop Superiore

    When I was in market for a car, I did read lot about these two options and EMI in Arrear was best. Sorry - I am not able to find the links, but in a nutshell, go for EMI with Arrear options.

    Regarding processing charges, did you check with SBI - afaik, they charge less processing charges than private banks.
  7. speedJet

    speedJet Superiore

    Have you checked the rates at www.bankbazaar.com. You can use the site to shortlist the best quotes available from different banks and then negotiate directly with those banks. When I tried it last week it was showing me 11% for Axis bank and 11.25% for HDFC

    Since you are taking a large amount as the loan, it would be better to go in for a company lease (if you are not planning to change your company for the lease period). This way you should be able to save tax also
  8. dj.nish

    dj.nish Superiore

    Yes, that's where I went. Got Axis and HDFC both at 11.5% rate. Negotiating with them, although HDFC seems to be strangely ignorant and lazy to call me. Also applied on Axis website and got a good rate. Hence, I'm most probably going for approval stage with both SBI and Axis. Depending on which comes first, I'll go with that. (The finance guy at my dealership is confident of my approval coming in 7 days as my documents are all proper).

    The advantage of SBI is that there are no part-pre-payment, foreclosure or processing fees. Though the rate is a floating one (not preferable for a car loan), but I can choose to partly repay my loan any time and hence cover up (if) an upward rate revision happens in future (though unlikely given the current economic scenario).

    I would have most definitely wanted HDFC, as I have a salary account with them for the last 4 years and also Preferred status. Hence I'm pre-approved with them and maybe stand a chance of a 0.25% rate reduction as well. But there lackadaisical attitude has really put me off. Some DSA of HDFC has called me but I want to deal directly with the Bank.

    HDFC's foreclosure charges are also low at 1.5% whereas Axis is at 5% for 1st year and 3% thereon.

    I do not want to consider company lease option - because I dont intend to stick to my company for long, forget the loan duration!
    Last edited: Sep 13, 2011
  9. dj.nish

    dj.nish Superiore

    EMI with arrear option seems good because of the timing of first payment. Got my doubt clarified from a banker, who says that advance EMI option is more of an internal jugglery and marketing thing practiced by private sector banks. They get to show loans at lower value (e.g. in my case, they will show loaned amount as Rs 700,000-15,250) and ROI as 11.5%. So the effective yield for them translates to a higher ROI.

    Nationalized banks on the other hands have to strictly follow RBI norms (no gimmicks here) and hence they work on zero advance or arrear basis.
  10. abk1980

    abk1980 Amatore

    Hi dj.nish,

    1. Rates are likley at their peak. Expect one last rate hike from RBI and cuts probably next year march onwards, if not earlier. With the global (and local) economy in doldrums, rate cuts will come soon. So, I'll recommend floating rates.
    2. As suggested by others, SBI is less likely to steal from you. Do read the fine print to confirm that there is no pre-payment penalty. I was under the impression that they do charge something.
    3. As far as payment in arrears / advance is concerned these are gimmicks to confuse you. To put it simply, the bank is lending you for effectively a longer period if you pay in arrears, so the EMI would be higher. To decide what to do here, I'll recommend you just put the cash flows on each date INCLUDING any processing fee date wise on an excel sheet and use the "rate" function to find the actual rate you are paying. Use this rate info along with the EMI and the effective upfront payment including the fee (and first EMI payment in case you pay in advance) to decide what to go for.

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